International rating agency Moody's today said the recent international junk bond sales by domestic companies offer the best protection to investors as they have the highest overall covenant quality scores.

In March, Delhi International Airport sold USD 288.75 million worth 7-year junk bonds to international investors at 6.12 per cent.

Last November, Indiabulls Real Estate for the first time tapped the global bond market by selling USD 175 million of junk bonds by selling 5-year notes at 10.25 per cent, the second highest ever by a domestic issuer.

Lodha Developers, after failing in November to sell USD 350 million bonds, finally made it in March by raising USD 200 million at a whopping 12 per cent in 7 year money, making it the costliest ever bond offering by any domestic company.

Reliance Communications too raised USD 300 million by selling offshore bonds at 6.50 per cent for 5.5 year maturity notes to international investors.

Low-rated securities are called high yield or junk bonds as they fall below the investment grade.

The Moody's report said that among these four, Lodha has the strongest overall covenant quality score and Indiabulls has the weakest score of the four.

Explaining the rationale for tagging these issuances as highly protected, the report said these issuers have better ability to pay dividends, make risky investments or take on incremental debt is limited.

"These deals have strong protections against value leakage, limited ability to make risky investments and effective limits on debt incurrence.

"They also contain few permitted liens carve-outs, which further limits the amount of secured debt these companies can incur," the report said.

It further said that the structural subordination risk of these notes is lower than in Chinese deals but higher than in Indonesian ones. Indian regulations are not as restrictive as Chinese in limiting onshore subsidiaries' ability to guarantee bonds.